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Item 7. Management’s Discussion and Analysis

2026-02-27 compared with 2025-02-14 · 182 added, 366 removed, 60 unchanged (90% of the section changed)

1 unchanged sentence

We provide Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) in addition to the accompanying consolidated financial statements and notes to assist readers in understanding our results of operations and financial condition.

We organize the MD&A as follows:

Discussion of our business outlook, operating results, investment activity, financing activity and capital requirements to provide context for the remainder of MD&A.

• Results of Operations.

Discussion of our financial results comparing 2024 to 2023.

• Liquidity and Capital Resources.

Discussion of our financial condition and analysis of changes in our capital structure and cash flows.

• Funds From Operations .

Calculation of NAREIT Funds From Operations (“NAREIT FFO”), a non-GAAP supplemental measure to net income.

• Critical Accounting Estimates.

Descriptions of accounting policies that reflect significant judgments and estimates used in the preparation of our consolidated financial statements.

When evaluating our financial condition and operating performance, we focus on the following financial and non-financial indicators:

• Net operating income (“NOI”) , calculated as set forth below under the caption "Results of Operations - Net Operating Income." NOI is a non-GAAP supplemental measure to net income.

• Funds From Operations (“NAREIT FFO”) , calculated as set forth below under the caption “Funds from Operations.” NAREIT FFO is a non-GAAP supplemental measure to net income.

• Average occupancy , calculated as average daily occupied apartment homes as a percentage of total apartment homes.

For purposes of evaluating comparative operating performance, we categorize our properties as “same-store” or “non-same-store”.

Same-store portfolio properties include properties that were owned for the entirety of the years being compared and exclude properties under redevelopment or development and properties acquired, sold or classified as held for sale during the years being compared.

We define development properties as those for which we have planned or ongoing major construction activities on existing or acquired land pursuant to an authorized development plan.

Development properties are categorized as same-store when they have reached stabilized occupancy (90%) before the start of the prior year.

We define redevelopment properties as those for which we have planned or ongoing significant development and construction activities on existing or acquired buildings pursuant to an authorized plan, which has an impact on current operating results, occupancy and the ability to lease space with the intended result of a higher economic return on the property.

We categorize a redevelopment property as same-store when redevelopment activities have been complete for the majority of each year being compared.

Our revenues are derived primarily from the ownership and operation of income producing property.

As of December 31, 2024, we owned approximately 9,400 residential apartment homes in the Washington, DC and Atlanta metro regions.

We also own and operate approximately 300,000 square feet of commercial space in the Washington, DC metro region.

During 2023, we completed the acquisition of Elme Druid Hills, a 500-unit apartment community in Atlanta, Georgia for a contract purchase price of $108.0 million.

In connection with our strategic transformation, which shifted our business away from the commercial sector to the residential sector, we redesigned our operating model for purposes of more efficiently and effectively supporting residential operations.

This operating model redesign included insourcing the property-level management activities at our multifamily properties previously performed by third-party management companies.

Community onboarding began in October 2022, and we have transitioned all of our residential communities to Elme management as of July 2023.

Costs related to the strategic transformation, including the allocation of internal costs, consulting, advisory and termination benefits, are included in transformation costs on our consolidated statements of operations.

We recognized $6.3 million of transformation costs, net of amounts capitalized, on the consolidated statements of operations during 2023.

We did not incur transformation costs in 2024 and do not anticipate incurring any additional transformation costs in the future.

We continue to realize significant operational benefits from this operating model redesign.

In the second quarter of 2024, as part of our previously announced centralization initiatives, we launched our shared services department, known as Elme Resident Services, which focuses on providing elevated customer service to our residents and onsite teams by streamlining community operations across our multifamily portfolio and enhancing process efficiencies across resident account management, collections and renewals.

On February 13, 2025, the Company announced that its Board has initiated a formal review to evaluate strategic alternatives for the Company in an effort to maximize shareholder value.

There is no deadline or definitive timetable set for completion of this review and there can be no assurance that this process will result in the Company pursuing a transaction or any other strategic outcome.

Operating Results

The discussion that follows is based on our Operating Results.

The ability to compare one period to another is affected by the acquisition completed in 2023 (see note 3 to the consolidated financial statements).

Net loss, NOI and NAREIT FFO for the years ended December 31, 2024 and 2023 were as follows (in thousands, except percentage amounts):

Year Ended December 31,

2024 2023 Change % Change

$ (13,103) $ (52,977) $ 39,874 (75.3) %

$ 153,234 $ 148,081 $ 5,153 3.5 %

NAREIT FFO (2)

$ 82,832 $ 77,833 $ 4,999 6.4 %

______________________________

(1) See page 33 of the MD&A for reconciliations of NOI to net loss.

(2) See page 43 of the MD&A for reconciliations of NAREIT FFO to net loss.

The decrease in net loss is primarily due to real estate impairment in our office property ($41.9 million) and transformation costs ($6.3 million) during 2023, and higher NOI ($5.2 million) and lower general and administrative expenses ($0.9 million) during 2024.

These were partially offset by higher interest expense ($7.4 million) and higher depreciation and amortization expenses ($7.0 million).

The increase in NOI is primarily due to the acquisition of Elme Druid Hills ($3.9 million) in 2023 and higher NOI from same-store properties ($1.9 million), partially offset by lower NOI at Watergate 600 ($0.6 million).

The higher same-store NOI was primarily due to higher rental rates.

Residential same-store average occupancy for our portfolio decreased to 94.8% as of December 31, 2024 from 95.2% as of December 31, 2023.

The higher NAREIT FFO is primarily due to higher NOI ($5.2 million), lower transformation costs ($6.3 million) and lower general and administrative expenses ($0.9 million).

These were partially offset by higher interest expense ($7.4 million).

Prior to adoption of the Plan of Sale and Liquidation, for purposes of evaluating comparative operating performance, we categorized our properties as “same-store” or “non-same-store.” Same-store portfolio properties included properties that were owned for the entirety of the years being compared and excluded properties under redevelopment or development and properties acquired, sold or classified as held for sale during the years being compared.

Following our adoption of a liquidation basis of accounting, our properties are no longer categorized in this manner and therefore we have not provided operating metrics on a same-store/non same-store basis.

On February 13, 2025, the Company announced that its Board had initiated a formal review to evaluate strategic alternatives.

On August 4, 2025, the Company announced that its Board had completed its review, that Elme had entered into a Purchase and Sale Agreement, dated as of August 1, 2025, for the Portfolio Sale Transaction, and that the Board had also approved the Plan of Sale and Liquidation, which contemplates the sale or disposition of all the Company’s assets, the wind-down of the Company’s business and affairs and the termination of the Company’s existence by voluntary dissolution.

The Plan of Sale and Liquidation includes a plan of liquidation that provides for the Company’s complete liquidation and dissolution in accordance with Section 331, Section 336 and Section 346(a) of the Code.

On October 30, 2025, our shareholders approved the Portfolio Sale Transaction and the Plan of Sale and Liquidation, and on November 12, 2025, Elme completed the Portfolio Sale Transaction.

Also on November 12, 2025, certain indirect subsidiaries of the Company, as Borrowers, and Goldman Sachs Bank USA, as Lender, entered into the Loan Agreement pursuant to which the Lender has made the Secured Term Loan of $520.0 million to the Borrowers.

Pursuant to the Loan Agreement, as of on November 12, 2025, the Secured Term Loan was secured by first priority mortgages and security interests on the ten Remaining Company Properties (which are directly owned by the Borrowers) and included:

Riverside Apartments, Elme Bethesda, Elme Germantown, Elme Watkins Mill, 3801 Connecticut Avenue, Kenmore Apartments, Elme Conyers, Elme Marietta, Elme Sandy Springs, and Watergate 600.

In addition, the Secured Term Loan was secured by pledges of all equity interests in the Borrowers, along with all other personal property of the Borrowers.

Subsequent to December 31, 2025, we completed the sale of two of the Remaining Company Properties, Elme Sandy Springs and Elme Marietta, for gross proceeds of approximately $112.75 million, a portion of which was used to partially repay the Secured Term Loan, and those properties were released from the mortgages securing the Secured Term Loan.

Given the Plan of Sale and Liquidation, our efforts are focused on selling the remaining properties, winding down the Company’s affairs and, when appropriate and in the Board’s discretion, distributing the net proceeds to our shareholders subject to the creation of necessary reserves for, and payment or other satisfaction of, the Company’s expenses and other liabilities and obligations.

Elme is aiming to complete the sales of the Remaining Company Properties by mid-year 2026.

Because the sales of our remaining properties are subject to, among other things, completion of the marketing and sale process and the negotiation of terms and completion of the sales, as applicable, the exact timing of completing the remaining property sales cannot be determined at this time and the Company cannot predict how long it will take to sell all of its remaining properties.

If we have not sold all of our remaining properties and paid all of our liabilities within 24 months after shareholder approval of the Plan of Sale and Liquidation, which was received on October 30, 2025, or if the Board otherwise determines that it is advantageous to do so earlier, we may transfer our remaining assets and liabilities to a liquidating trust and distribute interests in the liquidating trust to our shareholders or otherwise convert Elme to a liquidating limited liability company, partnership, or trust.

We cannot predict the exact amount to be distributed or the timing of the completion of the liquidation and termination of the Elme’s existence.

As of December 31, 2025, our portfolio consisted of the following assets, seven of which are located in the Washington, DC metro region and three of which are located in the Atlanta metro region.

Properties Location

Residential Communities

Riverside Apartments (1)

Alexandria, VA

3801 Connecticut Avenue Washington, DC

Kenmore Apartments Washington, DC

Elme Bethesda Bethesda, MD

Elme Watkins Mill Gaithersburg, MD

Elme Germantown Germantown, MD

Elme Conyers Conyers, GA

Elme Marietta (2)

Elme Sandy Springs (2)

Sandy Springs, GA

Office Building

Watergate 600 Washington, DC

(1) Includes an undeveloped land parcel held for development adjacent to the Riverside Apartments.

(2) Sold subsequent to year end.

Washington, DC metro region (6 apartment communities)

Per research by CBRE, a global leader in commercial real estate services and investment, macroeconomic conditions in the Washington, DC metro region, where the majority of our remaining assets are located, will continue to be impacted in 2026, with federal government employment expected to decrease by 6,000 jobs, following a decrease of over 22,000 jobs in 2025.

For our remaining multifamily assets in the in the Washington, DC metro region, we experienced lower occupancy and lower new lease rates caused by a reduction in demand during the fourth quarter of 2025.

We believe this market softness is primarily due to the effects of the federal government shutdown during the fourth quarter of 2025, together with federal government and other workforce reductions in the region.

While we anticipate the softness in the Washington, DC metro region area to continue during the first half of 2026, we expect seasonal improvement in leasing fundamentals during the spring and summer season.

Initial Liquidating Distribution

In accordance with the Plan of Sale and Liquidation, the Board approved a special liquidating distribution of $14.67 per share to its shareholders of record as of the close of business on December 22, 2025.

The special liquidating distribution was paid on January 7, 2026.

Investment Activity

There were no significant investment transactions during 2024.

On November 12, 2025, we sold a portfolio of 19 multifamily communities for $1.6 billion.

The communities included in the portfolio are as follows:

Cascade at Landmark The Wellington Elme Manassas

Clayborne Trove The Ashby at McLean

Elme Alexandria Roosevelt Towers Yale West

Bennett Park Elme Dulles Elme Druid Hills

Park Adams Elme Herndon Elme Cumberland

The Maxwell Elme Leesburg Elme Eagles Landing

The Paramount

Subsequent to December 31, 2025, we completed the sale of two of the Remaining Company Properties, Elme Sandy Springs and Elme Marietta, which comprise approximately 800 residential apartment homes – for gross proceeds of approximately $112.75 million, a portion of which was used to partially repay the Secured Term Loan, and those properties were released from the mortgages securing the Secured Term Loan.

As of February 27, 2026, we have also entered into purchase and sale agreements, which are no longer subject to ongoing inspection periods, pursuant to which we expect to sell three of the Remaining Company Properties:

Elme Watkins Mill, Elme Conyers and Watergate 600, to various buyers for aggregate gross proceeds of approximately $128.78 million, which are expected to close in the first or second quarter of 2026, subject to satisfaction of customary closing conditions, including, in the case of Elme Watkins Mill, regulatory requirements related to the sale of multifamily properties in Montgomery County, Maryland.

The marketing and sale process with respect to the other five Remaining Company Properties remains ongoing.

In January 2026, we began a formal marketing process for Riverside Apartments and continued the marketing and sale process with respect to Kenmore, 3801 Connecticut, Elme Bethesda and Elme Germantown.

The Company currently expects to finalize the sale of Elme Germantown in the second quarter of 2026 and the sale of Elme Bethesda by mid-year 2026.

The Company also expects to continue the marketing process for the DC and Virginia properties with a goal to have these three properties under contract by mid-May.

The Company continues to target completion of the sales of all Remaining Company Properties by mid-year 2026.

Financing Activity

In July 2024, we entered into a third amended and restated credit agreement (the “Amended Credit Agreement”) which provides for aggregate revolving loan commitments of $500.0 million (the “Amended and Restated Revolving Credit Facility”) with an accordion feature that allows us to increase the aggregate revolving loan commitments or add term loans of up to $1.0 billion, subject to the lenders’ agreement to provide additional revolving commitments or term loans.

The Amended and Restated Revolving Credit Facility has a four-year term ending in July 2028, with two six-month extension options.

Borrowings under the Amended and Restated Revolving Credit Facility will bear interest, at our option, at a rate of either (a)(i) daily SOFR plus 0.10% (the “Adjusted Daily Simple SOFR”) or (ii) term SOFR plus 0.10%, plus, in each case, a margin ranging from 0.70% to 1.40% (depending on our credit rating) or (b) the base rate plus a margin ranging from 0.00% to 0.40% (based upon our credit rating).

The base rate is the highest of the administrative agent’s prime rate, the federal funds rate plus 0.50% and Adjusted Daily Simple SOFR plus 1.0%.

In addition, the Amended Credit Agreement requires the payment of a facility fee equal to 0.10% to 0.30% (depending on our credit rating) on the $500.0 million committed capacity in respect of the Amended and Restated Revolving Credit Facility, without regard to usage.

The initial interest rate is based on Adjusted Daily Simple SOFR plus a margin of 0.85% and the initial facility fee equals 0.20%.

As of February 11, 2025, our Amended and Restated Revolving Credit Facility has a borrowing capacity of $320.0 million.

As of December 31, 2024, the interest rate on the Amended and Restated Revolving Credit Facility is based on the Adjusted Daily Simple SOFR (inclusive of the 0.10% credit spread adjustment) plus 0.85% applicable margin, the daily SOFR is 4.49% and the facility fee is 0.20%.

During 2024, we entered into a first amendment (the “Term Loan Amendment”) to our $125.0 million unsecured term executed in 2023 (“2023 Term Loan”).

The 2023 Term Loan has an interest rate of SOFR (subject to a credit spread adjustment of 10 basis points) plus a margin of 95 basis points (subject to adjustment depending on our credit rating).

The Term Loan Amendment implements various covenant and technical amendments to make the 2023 Term Loan consistent with corresponding provisions in the Amended Credit Agreement.

The Term Loan Amendment does not change the maturity or any of the pricing terms of the term loan outstanding under the 2023 Term Loan.

We entered into two forward interest rate swap arrangements with an aggregate notional amount of $150.0 million beginning on January 10, 2025 through January 10, 2026.

These forward interest rate swap arrangements will effectively fix a portion of our variable rate debt based on an adjusted daily SOFR at 4.72% (subject to applicable interest rate margins).

In the fourth quarter of 2024, we exercised one of two one-year extension options on the 2023 Term Loan (as defined below) to extend the maturity of the loan to January 10, 2026.

Capital Requirements

We exercised one of two one-year extension options on the 2023 Term Loan which results in no current debt maturities scheduled for 2025.

We expect to have additional capital requirements as set forth on page 37 (Liquidity and Capital Resources - Capital Requirements).

On November 12, 2025, in connection with the closing of the Portfolio Sale Transaction, the Company caused the repayment in full of all indebtedness, liabilities and other obligations under, and terminated, each of (i) the Third Amended and Restated Credit Agreement, dated July 10, 2024, by and among the Company, as borrower, the financial institutions party thereto as lenders, and Wells Fargo Bank, National Association, as administrative agent, (ii) the Term Loan Agreement, dated January 10, 2023, with Truist Bank, as administrative agent, and the lenders party thereto, as amended, and (iii) the Note Purchase Agreement, dated September 29, 2020, by and among the Company and other parties named therein as purchasers.

The Company did not incur any material early termination penalties as a result of such terminations.

On November 12, 2025, in connection with the Portfolio Sale Transaction, the Company provided notice to the holders of its 7.25% senior notes due 2028 (the “Senior Notes”) of its intention to redeem on December 12, 2025 all of the outstanding $50 million aggregate principal amount of Senior Notes at the applicable redemption price and on the terms set forth in the indenture, dated as of August 1, 1996 (as amended or supplemented as of the date hereof, the “Indenture”), between the Company and The Bank of New York Mellon Trust Company, N.A., as successor to The First National Bank of Chicago, as trustee.

In connection with the redemption of the Senior Notes, on November 12, 2025, the Company caused funds sufficient to pay and discharge the entire indebtedness on the Senior Notes and all other sums payable by the Company under the Indenture to be irrevocably deposited with the trustee and, accordingly, the Indenture with respect to the Senior Notes was satisfied and discharged, except with respect to those obligations under the Indenture that expressly survive satisfaction and discharge.

The Senior Notes were redeemed on December 12, 2025.

On November 12, 2025, the Borrowers and Lender entered into the Loan Agreement pursuant to which the Lender has made the Secured Term Loan to the Borrowers as described above.

The Company has provided a customary non-recourse carveout guaranty.

The Loan Agreement contains certain affirmative and negative covenants with which Borrowers must comply, including maintenance of insurance, single-purpose bankruptcy, remote entity requirements, reporting requirements and restrictions on property and equity transfers and the granting of liens.

Customary events of default are included in the Loan Agreement, including nonpayment of principal and other amounts when due, nonperformance of covenants, breach of representations and warranties, certain bankruptcy or insolvency events and changes in control, the occurrence of which give Lender the right to accelerate repayment of the Secured Term Loan.

The Secured Term Loan matures on November 9, 2026, subject to a one-year Borrowers’ extension option, which is subject to satisfaction of certain specified conditions, including the payment of an extension fee equal to 0.25% of the then outstanding principal amount of the Secured Term Loan and the requirement that no more than $312 million of the Secured Term Loan may be outstanding on the first day of the extended term.

The Secured Term Loan bears interest at a per annum rate equal to the one-month term SOFR (subject to a term SOFR floor of 3.00%) plus the spread.

The spread is 2.25%, and will increase in June 2026 to 2.75% and further increase to 4.00% in June 2027 (if extended).

The Company has purchased an interest rate cap that effectively caps term SOFR at 5.00% per annum.

On February 9, 2026, a duration fee equal to 0.20% of the then outstanding principal amount of the Secured Term Loan was paid to the Lender.

The Secured Term Loan requires that the Company enter into cash management arrangements set forth in the certain cash management agreements pursuant to which the Company maintains a restricted account into which all revenue from the Loan Collateral is deposited during the term of the Secured Term Loan.

Amounts on deposit in the restricted account will be transferred:

weekly to an account under the sole control of the lender, and provided an event of default is not continuing under the Secured Term Loan, funds deposited in the account controlled by the lender will be applied to pay items such as real estate taxes, insurance premiums, debt service obligations, the lender required reserves for budgeted capital expenditures and operating expenses, with excess funds deposited available to pay general and administrative expenses subject to certain limitations.

Excess cash remaining after the sale of Loan Collateral and the payment of a release price paid to the lender to release the lien of its mortgages shall be deposited with the Lender as additional cash collateral unless certain conditions, including a minimum balance of $10 million in the shortfall account, certain debt yield requirements, and no events of default, are met, in which case such excess cash may be disbursed to the Company for distribution.

The cash management agreement contains provisions for the cure of certain of these events.

The Secured Term Loan is intended to be repaid with the net proceeds from one or more sales of the properties securing the Secured Term Loan, and such properties shall be released from the mortgages securing the Term Loan as they are sold, upon satisfaction of certain conditions and payment of a minimum release price applied to the prepayment of the Secured Term Loan.

An exit fee equal to 0.50% of the principal amount of the Secured Term Loan repaid is payable with any prepayment or repayment of the Secured Term Loan, including at maturity, provided, that no exit fee is payable (i) if the Secured Term Loan is refinanced by the lender or its

affiliates or (ii) if the Secured Term Loan is repaid with the proceeds of an arm’s length sale of one or more of the properties securing the Secured Term Loan.

As of December 31, 2025, the interest rate on the Secured Term Loan is 6.00%, which is based on the one-month term SOFR plus 2.25% applicable margin.

As of February 27, 2026, after giving effect to the sales of Elme Sandy Springs and Elme Marietta and corresponding partial paydown of the Secured Term Loan, $415.2 million of the principal under the Secured Term Loan remains outstanding at the current interest rate of 5.91%.

Results of Operations

The discussion that follows is based on our consolidated results of operations for the two years ended December 31, 2024.

The ability to compare one period to another is affected by the acquisition completed during 2023 (see note 3 to the consolidated financial statements).

Net Operating Income

NOI, defined as real estate rental revenue less direct real estate operating expenses, is a non-GAAP measure.

NOI is calculated as net income, less non-real estate revenue and the results of discontinued operations (including the gain or loss on sale, if any), plus interest expense, depreciation and amortization, lease origination expenses, general and administrative expenses, acquisition costs, real estate impairment, casualty gain and losses and gain or loss on extinguishment of debt.

NOI does not include management expenses, which consist of corporate property management costs and property management fees paid to third parties.

NOI is the primary performance measure we use to assess the results of our operations at the property level.

We believe that NOI is a useful performance measure because, when compared across periods, it reflects the impact on operations of trends in occupancy rates, rental rates and operating costs on an unleveraged basis, providing perspective not immediately apparent from net income.

NOI excludes certain components from net income in order to provide results more closely related to a property’s results of operations.

For example, interest expense is not necessarily linked to the operating performance of a real estate asset.

In addition, depreciation and amortization, because of historical cost accounting and useful life estimates, may distort operating performance at the property level.

As a result of the foregoing, we provide NOI as a supplement to net income, calculated in accordance with GAAP.

NOI does not represent net income or income from continuing operations calculated in accordance with GAAP.

As such, NOI should not be considered an alternative to these measures as an indication of our operating performance.

A reconciliation of NOI to net income follows.

2024 Compared to 2023

The following tables reconcile net income to NOI and provide the basis for our discussion of our consolidated results of operations and NOI in 2024 compared to 2023.

All amounts are in thousands except percentage amounts.

As of December 31, 2025, we owned approximately 3,570 residential apartment homes in the Washington, DC and Atlanta metro regions compared to 9,400 residential apartment homes in the Washington, DC and Atlanta metro regions as of December 31, 2024.

We also owned and operated approximately 300,000 square feet of commercial space in the Washington, DC metro region as of both December 31, 2025 and 2024.

Subsequent to December 31, 2025, we completed the sale of two of the Remaining Company Properties, Elme Sandy Springs and Elme Marietta.

As of February 27, 2026, we owned approximately 2,500 residential apartment homes and approximately 300,000 square feet of commercial space in the Washington, DC metro region and approximately 200 residential apartment homes in the Atlanta metro region.

Our revenues are derived primarily from the ownership and operation of income producing property.

While we discuss certain financial metrics below, in light of the approval of the Plan of Sale and Liquidation on October 30, 2025 and the adoption of the liquidation basis of accounting as of November 1, 2025 and sale of 19 assets in the Portfolio Sale Transaction, the results of operations for the current year are not comparable to the prior year.

The information provided below compares the ten months ended October 31, 2025 to the year ended December 31, 2024.

Ten Months Ended October 31,

Year Ended December 31,

2024 2023 $ Change % Change

Net loss $ (13,103) $ (52,977) $ 39,874 (75.3) %

Property management expense 8,861 8,108 753 9.3 %

General and administrative expense 24,969 25,887 (918) (3.5) %

Transformation costs — 6,339 (6,339) (100.0) %

Real estate depreciation and amortization 95,935 88,950 6,985 7.9 %

Real estate impairment — 41,860 (41,860) (100.0) %

Interest expense 37,835 30,429 7,406 24.3 %

Loss on extinguishment of debt, net 147 54 93 172.2 %

Other income (1,410) (569) (841) 147.8 %

Total net operating income (NOI) $ 153,234 $ 148,081 $ 5,153 3.5 %

Residential revenue:

Same-store portfolio $ 213,670 $ 206,762 $ 6,908 3.3 %

Acquisitions (1)

9,968 2,549 7,419 291.1 %

Development — — — — %

Total 223,638 209,311 14,327 6.8 %

Residential expenses:

Same-store portfolio 78,470 73,431 5,039 6.9 %

Acquisitions 4,363 880 3,483 395.8 %

Development 233 224 9 4.0 %

Total 83,066 74,535 8,531 11.4 %

Residential NOI:

Same-store portfolio 135,200 133,331 1,869 1.4 %

Acquisitions 5,605 1,669 3,936 235.8 %

Development (233) (224) (9) 4.0 %

Total 140,572 134,776 5,796 4.3 %

Other NOI (2)

Real estate rental revenue

$ 206,360 $ 241,935

Total NOI $ 153,234 $ 148,081 $ 5,153 3.5 %

Real estate operating (loss) income

(122,208) 23,469

(1) 2023 Acquisition:

Elme Druid Hills

Watergate 600

Real Estate Rental Revenue

Real estate rental revenue from our apartment communities is comprised of (a) rent from operating leases of residential apartments with terms of approximately one year or less, recognized on a straight-line basis, (b) revenue from the recovery of operating expenses from our residents, (c) credit losses on lease related receivables, (d) revenue from leases of retail space at our apartment communities and (e) parking and other tenant charges.

Real estate rental revenue from same-store residential properties increased $6.9 million, or 3.3%, to $213.7 million for 2024, compared to $206.8 million for 2023, primarily due to higher rental income ($5.8 million), higher recoveries ($1.6 million), higher ancillary income ($0.6 million) and higher other rental and fee income ($0.5 million), partially offset by higher concessions ($0.7 million), higher vacancy loss ($0.7 million) and higher credit losses ($0.2 million).

Real estate rental revenue from acquisitions increased $7.4 million or 291.1% to $10.0 million for 2024, compared to $2.5 million for 2023, primarily due to the acquisition of Elme Druid Hills during the third quarter of 2023.

Average occupancy for residential properties for 2024 and 2023 was as follows:

December 31, 2024 December 31, 2023 % Change

Same-Store Non-Same-Store Total Same-Store Non-Same-Store Total Same-Store Non-Same-Store Total

(154,162) (13,103)

The decrease in same-store average occupancy was primarily due to lower average occupancy at Elme Marietta, Elme Eagles Landing, Elme Sandy Springs and Park Adams, partially offset by higher average occupancy at Elme Manassas, Elme Leesburg and Elme Alexandria.

Real Estate Expenses

Residential real estate expenses as a percentage of residential revenue for 2024 and 2023 were 37.1% and 35.6%, respectively.

Real estate expenses from same-store residential properties increased $5.0 million, or 6.9%, to $78.5 million for 2024, compared to $73.4 million for 2023, primarily due to higher utilities ($1.4 million), higher administrative ($1.2 million), higher real estate taxes ($1.1 million), higher maintenance ($1.1 million) and higher insurance ($0.8 million) expenses.

The increase was partially offset by lower personnel ($0.7 million) expenses.

Real estate expenses from acquisitions increased $3.5 million in 2024 due to the acquisition of Elme Druid Hills during the third quarter of 2023.

Other NOI decreased primarily due to lower operating income ($0.3 million) and higher repairs and maintenance expense ($0.3 million) at Watergate 600.

Other Income and Expenses

Property management expenses:

Increase of $0.8 million primarily due to higher internal management fee expenses at same-store properties ($0.5 million) and the acquisition of Elme Druid Hills during the 2023 Quarter ($0.3 million).

General and administrative expenses :

Decrease of $0.9 million primarily due to higher internal management fee offset ($2.3 million), corporate office moving expenses ($0.6 million) in 2023, lower rent for our corporate office ($0.6 million) and lower severance ($0.6 million) expenses in 2024.

These were partially offset by higher payroll ($1.3 million), higher software ($0.8 million), higher incentive compensation ($0.6 million) expenses and an adjustment to deferred taxes ($0.5 million) in 2023.

Transformation costs:

Decrease of $6.3 million due to completion of strategic transformation in 2023.

Depreciation and amortization :

Increase of $7.0 million primarily due to higher depreciation and amortization at same-store residential properties ($5.7 million) and at Elme Druid Hills ($3.5 million).

The increase was partially offset by lower depreciation and amortization at Watergate 600 ($2.3 million).

Interest Expense :

Interest expense by debt type for the years ended December 31, 2024 and 2023 was as follows (in thousands):

Year Ended December 31,

Debt Type 2024 2023 $ Change % Change

Notes payable $ 24,497 $ 23,152 $ 1,345 5.8 %

Line of credit 13,338 7,277 6,061 83.3 %

Total $ 37,835 $ 30,429 $ 7,406 24.3 %

• Notes payable :

Increase primarily due to the $125.0 million 2023 Term Loan executed in January 2023, partially offset by prepayment of a $100.0 million portion of a $250.0 million unsecured term loan (the “2018 Term Loan”) in January 2023.

• Line of credit :

Increase primarily due to higher weighted average borrowings of $169.3 million and a weighted average interest rate of 6.1% in 2024, as compared to a weighted average borrowings of $70.6 million and weighted average interest rate of 6.2% in 2023.

Loss on extinguishment of debt:

Loss during 2024 was due to a write-off of capitalized debt origination costs in association with the execution of our Amended and Restated Revolving Credit Facility in July 2024.

Other income :

Other income during 2024 consists of additional payments received with respect to easements previously conveyed at The Wellington and Takoma Park, a previously owned retail property.

Income of $0.6 million during 2023 consists of tax refunds received for office properties sold in prior years.

Real estate impairment :

The real estate impairment charge of $41.9 million during 2023 reduced the carrying value of Watergate 600 to its estimated fair value.

Real estate operating loss for the ten months ended October 31, 2025 is primarily due to real estate impairment and an increase in general and administrative expenses.

During the third quarter of 2025, the Company recognized an aggregate impairment charge of $111.7 million related to several properties not included as part of the Portfolio Sale Transaction.

The estimated cash flows for those certain properties were less than their respective carrying values primarily due to a revision of their estimated holding periods.

The increase in general and administrative expenses primarily includes accrued severance and professional fees incurred in association with our Plan of Sale and Liquidation and the Portfolio Sale Transaction.

Operating Metrics

Average Occupancy and Ending Occupancy for our nine remaining residential properties for the year ended December 31, 2025 was 93.2% and 91.8%, respectively, compared to 94.0% and 94.4%, respectively, for the same nine properties for the year ended December 31, 2024.

Watergate 600 was 81.6% leased and had an ending occupancy of 81.6% for the year ended December 31, 2025, compared to 84.7% and 84.7%, respectively, for the year ended December 31, 2024.

2024 Compared to 2023

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Liquidity and Capital Resources

We believe we will have adequate liquidity over the next twelve months to operate our business and to meet our cash requirements, including meeting our debt obligations, capital and contractual obligations, as well as the payment of dividends, and funding possible growth opportunities.

We also believe we have adequate liquidity beyond 2024 and we have no debt maturities until 2026 and only $351 million of scheduled debt maturities prior to 2029, based on current amounts outstanding under our Amended and Restated Revolving Credit Facility.

We will continue to assess the payment of our dividends on a quarterly basis.

Future determinations regarding the declaration and payment of dividends, if any, will be at the discretion of our Board which considers, among other factors, trends in our levels of funds from operations and ongoing capital requirements to achieve a targeted payout ratio.

Capital Structure

We manage our capital structure to reflect a long-term investment approach, generally seeking to match the cash flow of our assets with a mix of equity and various debt instruments.

We expect that our capital structure will allow us to obtain additional capital from diverse sources that could include additional equity offerings of common shares, public and private secured and unsecured debt financings, asset dispositions, operating units and joint venture equity.

Our ability to raise funds through the incurrence of debt and issuance of equity securities is dependent on, among other things, general economic conditions including general market conditions for REITs, our operating performance, our debt rating, the current trading price of our common shares and other capital market conditions.

We analyze which source of capital we believe to be most advantageous to us at any particular point in time.

As of February 11, 2025, we had cash and cash equivalents of approximately $5.9 million and availability under our Amended and Restated Revolving Credit Facility of $320.0 million.

We currently expect that our potential sources of liquidity for acquisitions, development, redevelopment, expansion and renovation of properties, and operating and administrative expenses, may include:

• Cash flow from operations;

• Borrowings under our Amended and Restated Revolving Credit Facility or other new short-term facilities;

• Issuances of our equity securities and/or common units in operating partnerships;

• Issuances of preferred shares;

• Proceeds from long-term secured or unsecured debt financings, including construction loans and term loans, or the issuance of debt securities;

• Investment from joint venture partners;

• Net proceeds from the sale of assets.

During 2025, we expect that we will have significant capital requirements, including the following:

• Funding dividends and distributions to our shareholders (which we intend to continue to pay at or about current levels);

• Approximately $41.0 - $46.0 million to invest in our existing portfolio of operating assets inclusive of $27.0 - $32.0 million of major capital expenditures;

• Funding for potential property acquisitions throughout 2025, offset by proceeds from potential property dispositions.

There can be no assurance that our capital requirements will not be materially higher or lower than the above expectations.

We currently believe that we will generate sufficient cash flow from operations and potential property sales and have access to the capital resources necessary to fund our requirements in 2025.

However, as a result of the uncertainty of the general market conditions in the greater Washington, DC metro and Sunbelt regions, economic conditions affecting the ability to attract and retain residents and tenants or achieve anticipated rental rates, declines in our share price, unfavorable changes in the supply of competing properties, or our properties not performing as expected, we may not generate sufficient cash flow from operations and property sales or otherwise have access to capital on favorable terms, or at all.

If we are unable to obtain capital from other sources, we may need to alter capital spending to be materially different than what is stated above.

If capital were not available, we may be unable to satisfy the distribution requirement applicable to REITs, make required principal and interest payments, make strategic acquisitions or make necessary and/or routine capital improvements or undertake improvement/redevelopment opportunities with respect to our existing portfolio of operating assets.

As described in the “Overview” section, our Board and our shareholders approved the Plan of Sale and Liquidation.

In accordance with the Plan of Sale and Liquidation, our objectives are to pursue an orderly liquidation of our company by selling or otherwise disposing of our remaining assets, paying or otherwise settling our debts and our known liabilities, providing for the payment of unknown or contingent liabilities, when appropriate and in the Board’s discretion, distributing the net proceeds to our shareholders, subject to the creation of necessary reserves for, and payment or other satisfaction of, the Company’s expenses and other liabilities and obligations and winding up our operations and dissolving our company.

On November 25, 2025, we announced a special liquidating distribution of $14.67 per share which was paid on January 7, 2026 to shareholders of record at the close of business on December 22, 2025.

We may pay one or more additional liquidating distribution(s) to our shareholders during the remainder of the liquidation process.

We expect to pay the final liquidating distribution after we sell all of our assets, pay or provide for all of our known liabilities and obligations and provide for unknown liabilities and obligations.

We expect to complete these activities within 24 months of October 30, 2025, the day we received shareholder approval of the Plan of Sale and Liquidation.

A final liquidating distribution to our shareholders may not be paid until all of our liabilities have been satisfied.

Our expectations about the amount of liquidating distributions that we will pay and when we will pay them are based on many estimates and assumptions, one or more of which may prove to be incorrect.

As a result, the actual amount of the remaining liquidating distributions we pay to our shareholders may be more or less than we estimate and the remaining liquidating distributions may be paid later than we predict.

We intend to maintain adequate cash reserves for liquidity, debt repayments and other future capital needs.

We expect our principle demands for funds during the liquidation period are and will be for the payment of operating expenses, principal and interest payments on our Secured Term Loan, general and administrative expenses, including expenses in connection with the Plan of Sale and Liquidation, transaction costs related to asset sales and payments of distributions to shareholders pursuant to the Plan of Sale and Liquidation.

We expect to use our cash on hand and net sales proceeds from the sale of our assets as our primary source of liquidity.

To the extent available, we also intend to use cash flow generated by our real estate assets;

however, asset sales will further reduce cash flow from these sources.

As of December 31, 2025, our cash and cash equivalents were approximately $1.3 billion and we had $17.3 million of restricted cash (funds held by the Lender in lender-controlled reserve accounts under the Secured Term Loan, including reserves for property taxes and insurance premiums, capital expenditures and certain other approved operating expenses and capital items).

The cash and cash equivalents included approximately $1.3 billion paid as the special liquidating distribution on January 7, 2026.

Liquidating Distributions

On January 23, 2026, the Company announced that its current estimate of the total amount of remaining liquidating distributions to be funded from the net proceeds of sales of the Remaining Company Properties was estimated to be between $2.35 and $2.80 per share.

Based on this updated estimate, the total amount of liquidating distributions (including the initial $14.67 per share liquidating distribution paid in January 2026) was estimated to be between $17.02 and $17.47 per share.

The Company’s estimate of the ranges of liquidating distributions were derived from a number of assumptions and estimates, including the estimated range of gross asset sales proceeds for the Remaining Company Properties, many of which are outside the Company’s control and may not prove to be accurate, which could cause actual liquidating distributions, to be less or more than the estimated ranges.

For more information regarding the estimates and assumptions, and various risks associated with such estimates and assumptions, see the risk factor titled “We cannot determine at this time the amount or timing of the remaining liquidating distributions, if any, to our shareholders in connection with the Plan of Sale and Liquidation because there are many factors that could affect the amount or timing of any such liquidating distributions, if any, some of which are not within our control”.

Debt Financing

We generally use secured or unsecured, corporate-level debt, including unsecured notes, our Amended and Restated Revolving Credit Facility, bank term loans and mortgages, to meet our borrowing needs.

Long-term, we generally use fixed rate debt instruments in order to match the returns from our real estate assets.

If we issue unsecured debt in the future, we will seek to ladder the maturities of our debt to mitigate exposure to interest rate risk in any particular future year.

We also utilize variable rate debt for short-term financing purposes.

At times, our mix of variable and fixed rate debt may not suit our needs.

At those times, we may use derivative financial instruments including interest rate swaps and caps, forward interest rate options or interest rate options in order to assist us in managing our debt mix.

We may either hedge our variable rate debt to give it an effective fixed interest rate or hedge fixed rate debt to give it an effective variable interest rate.

As of December 31, 2024, our future debt principal payments are scheduled as follows (in thousands):

Year Unsecured Notes Payable/Term Loans Amended and Restated Revolving Credit Facility

Total Debt Average Interest Rate

2025 — — $ — — %

2026 125,000 (1) — 125,000 4.7 %

2027 — — — — %

2028 50,000 176,000 (2) 226,000 5.7 %

2029 — — — — %

Thereafter 350,000 — 350,000 4.1 %

Scheduled principal payments 525,000 176,000 701,000 4.7 %

Premiums and discounts, net (71) — (71)

Debt issuance costs, net (1,976) — (1,976)

Total $ 522,953 $ 176,000 $ 698,953 4.7 %

______________________________

(1) During 2023, we entered into the 2023 Term Loan, which has an initial two-year term ending in January 2025, and provided for two one-year extension options.

In the fourth quarter of 2024, we exercised one of two one-year extension options on the 2023 Term Loan to extend the maturity of the loan to January 10, 2026.

In the first quarter of 2023, we entered into two interest rate swap arrangements with an aggregate notional amount of $125.0 million that effectively fixed the 2023 Term Loan’s interest rate at 4.73% beginning on July 21, 2023 through the 2023 Term Loan’s initial maturity date of January 10, 2025.

In the second quarter of 2024, we entered into two forward interest rate swap arrangements with an aggregate notional amount of $150.0 million beginning on January 10, 2025 through the loan maturity date of January 10, 2026.

These forward interest rate swap arrangements effectively fix a portion of our variable rate debt based on an adjusted daily SOFR at 4.72% (subject to applicable interest rate margins).

(2) During the third quarter of 2024, we executed the Amended Credit Agreement that provides for a revolving credit facility of $500.0 million that matures in July 2028, with two six-month extension options.

The weighted average maturity for our debt was 4.4 years as of December 31, 2024.

If principal amounts due at maturity cannot be refinanced, extended or paid with proceeds of other capital transactions, such as new equity capital, our cash flow may be insufficient to repay all maturing debt.

Prevailing interest rates or other factors at the time of a refinancing, such as possible reluctance of lenders to make commercial real estate loans, may result in higher interest rates and increased interest expense or inhibit our ability to finance our obligations.

From time to time, we may seek to repurchase and cancel our outstanding unsecured notes and term loans through open market purchases, privately negotiated transactions or otherwise.

Such repurchases, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors.

The amounts involved may be material.

Aside from the Secured Term Loan described in the “Overview” section, the Company does not have any other outstanding debt obligations as of December 31, 2025.

Debt Covenants

Pursuant to the terms of the Amended Credit Agreement, 2023 Term Loan and unsecured notes, we are subject to customary operating covenants and maintenance of various financial ratios.

Failure to comply with any of the covenants under the Amended Credit Agreement, 2023 Term Loan, unsecured notes or other debt instruments could result in a default under one or more of our debt instruments.

This could cause our lenders to accelerate the timing of payments and could therefore have a material adverse effect on our business, operations, financial condition and liquidity.

In addition, our ability to draw on our Amended and Restated Revolving Credit Facility or incur other unsecured debt in the future could be restricted by the debt covenants.

As of December 31, 2024, we were in compliance with the covenants related to our Amended Credit Agreement, 2023 Term Loan, and unsecured notes.

As of December 31, 2025, we were in compliance with the covenants related to the Secured Term Loan, including those

covenants with respect to maintenance of insurance, single-purpose bankruptcy, remote entity requirements, reporting requirements and restrictions on property and equity transfers and the granting of liens.

Common Equity

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At the time of such termination, approximately $340.0 million remained unsold under such prior program.

We did not issue common shares under the Equity Distribution Agreement or any prior equity distribution agreements in 2024 or 2023.

Our issuances and net proceeds on the prior equity distribution agreement in 2022, were as follows (in thousands, except per share data):

Year Ended December 31,

2024 2023 2022

Issuance of common shares — — 1,032

Weighted average price per share $ — $ — $ 26.27

Net proceeds $ — — $ 26,849

We have a dividend reinvestment program, whereby shareholders may use their dividends and optional cash payments to purchase common shares.

The common shares sold under this program may either be common shares issued by us or common shares purchased in the open market.

We did not issue common shares under the dividend reinvestment program during 2024.

Our issuances and net proceeds on the dividend reinvestment program for 2023 and 2022 were as follows (in thousands;

except per share data):

Year Ended December 31,

2024 2023 2022

Issuance of common shares — 28 47

Weighted average price per share $ — $ 17.64 $ 22.40

Net proceeds $ — $ 497 $ 1,030

On October 26, 2023, the Board authorized and approved a share repurchase program of up to $50.0 million of the Company’s common shares of beneficial interest over a period of two years, subject to any applicable limitations or restrictions set forth in

our existing credit facility and other debt agreements.

The share repurchase program is scheduled to expire on October 25, 2025, unless extended by the Board.

No common shares have been issued under the Equity Distribution Agreement, and subsequent to year-end, we terminated the Equity Distribution Agreement.

We have a dividend reinvestment program, whereby shareholders were able to use their dividends and optional cash payments to purchase common shares.

The common shares sold under this program were either be common shares issued by us or common shares purchased in the open market.

In September 2025, the Company suspended its dividend reinvestment program.

During the suspension period, dividend payments are not automatically reinvested in additional shares of our common shares of beneficial interest and participants in the dividend reinvestment program are not able to purchase shares of our common shares of beneficial interest through optional cash investments under the dividend reinvestment program.

We do not intend to restart the dividend reinvestment program.

We did not issue common shares under the dividend reinvestment program during 2025 or 2024.

In 2023 we issued approximately 28,000 shares at a weighted average price per share of $17.64 for net proceeds of $0.5 million.

The share repurchase program expired on October 25, 2025.

Preferred Equity

Our Board can, at its discretion, authorize the issuance of up to 10.0 million preferred shares.

The ability to issue preferred equity provides Elme Communities an additional financing tool that may be used to raise capital for future acquisitions or other business purposes.

The ability to issue preferred equity provides Elme Communities an additional financing tool that may be used to raise capital for business purposes.

As of December 31, 2025, no preferred shares were issued and outstanding.

Capital Commitments

We will require capital for development and redevelopment projects currently underway and in the future.

We previously engaged in predevelopment activities for the ground-up development of a residential property on land adjacent to Riverside Apartments, but as of the second quarter of 2022, we paused development activities.

As of December 31, 2024, we had no outstanding contractual commitments related to our development and redevelopment projects and do not expect to spend on our development and redevelopment projects during 2025.

We anticipate funding approximately $27.0 - $32.0 million on several major renovation projects at our residential communities during 2025.

These projects include unit renovations, property technology initiatives, common area and mechanical upgrades, facade restorations and roof replacements.

Not all of the anticipated spending had been committed via executed construction contracts at December 31, 2024.

We expect to fund these projects using cash generated by our real estate operations, through borrowings on our Amended and Restated Revolving Credit Facility, or raising additional debt or equity capital in the public market.

Contractual Obligations

As of December 31, 2024, certain contractual obligations will require significant capital as follows (in thousands):

Payments due by Period

Total Less than 1

year 1-3 years 4-5 years After 5

Long-term debt (1)

$ 809,425 $ 24,908 $ 405,887 $ 378,630 $ —

______________________________

(1) See notes 6 and 7 of the consolidated financial statements.

Amounts include principal, interest and facility fees.

In addition to our long-term debt, we have committed building capital expenditures of $2.0 million in 2025 based on contracts in place as of December 31, 2024, along with other various standing or renewable contracts with vendors.

As of December 31, 2025, we owed $520.0 million on our Secured Term Loan.

Subsequent to December 31, 2025, and after giving effect to the sales of Elme Sandy Springs and Elme Marietta and corresponding partial paydown of the Secured Term Loan, $415.2 million of the principal amount remains outstanding under our Secured Term Loan.

We currently lease and occupy office space for our corporate headquarters.

The corporate office lease has an expiration date of September 30, 2033 and we would expect to incur approximately $3.2 million in prepayment penalties if we terminate the lease during 2026.

We are actively exploring alternatives to reduce the total cost of our corporate headquarters.

We have and will continue to incur severance, retention and benefit obligations in association with our Plan of Sale and Liquidation.

We estimate that payments related to such obligations in 2026 will total approximately $17.3 million.

In addition to our Secured Term Loan, office lease and severance obligations, we have various standing or renewable contracts with vendors.

The majority of these contracts can be canceled with immaterial or no cancellation penalties, with the exception of our elevator maintenance agreements and our electricity and gas purchase agreements.

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Historical Cash Flows

Cash flows from operations are an important factor in our ability to sustain our dividend at its current rate.

If our cash flows from operations were to decline significantly from current levels, we may have to reduce our dividend.

Consolidated cash flows for the three years ended December 31, 2024 are summarized as follows (in thousands):

Year ended December 31, Variance

2024 2023 2022 2024 vs.

Cash provided by operating activities was $62.2 million for the ten months ended October 31, 2025.

Cash used in investing activities was $27.0 million for the ten months ended October 31, 2025, primarily due to capital improvement expenditures at our residential communities.

Cash used in financing activities was $35.0 million for the ten months ended October 31, 2025, primarily due to the payment of quarterly dividends partially offset by net borrowings on the Amended and Restated Revolving Credit Facility.

Consolidated cash flows for the two years ended December 31, 2024 are summarized as follows (in thousands):

2024 2023 2024 vs.

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(51,432) 60,238 (111,670)

Net cash provided by operating activities increased in 2024 as compared to 2023 primarily due to higher rental revenue from the acquisition of Elme Druid Hills in 2023 and from same-store communities.

Net cash provided by operating activities increased in 2023 as compared to 2022 primarily due to the acquisitions of Elme Sandy Springs, Elme Marietta and Elme Cumberland in 2022.

Net cash provided by operating activities increased in 2024 as compared to 2023 was primarily due to higher rental revenue from the acquisition of Elme Druid Hills in 2023 and from same-store communities.

Net cash used in investing activities decreased in 2024 as compared to 2023 primarily due to the acquisition of Elme Druid Hills during 2023.

Net cash used in investing activities decreased in 2023 as compared to 2022 primarily due to the acquisitions of Elme Sandy Springs, Elme Marietta and Elme Cumberland during 2022, partially offset by the acquisition of Elme Druid Hills during 2023.

Net cash used in financing activities increased in 2024 primarily due to executing the $125.0 million 2023 Term Loan during 2023, partially offset by the prepayment of a $100.0 million portion of the 2018 Term Loan during 2023 and higher net borrowings on the Amended and Restated Revolving Credit Facility during 2024.

Net cash provided by (used in) financing activities increased in 2023 compared to 2022 primarily due to executing the $125.0 million 2023 Term Loan and net borrowings on the Revolving Credit Facility during 2023 and the repayment of mortgage notes during 2022.

These were partially offset by the repayment of the $100.0 million 2018 Term Loan during 2023 and proceeds from equity issuances during 2022.

Capital Improvements and Development Costs

Our capital improvement, development and redevelopment costs for the three years ended December 31, 2024 were as follows (in thousands):

Year Ended December 31,

2024 2023 2022

Accretive capital improvements and development costs:

Acquisition related improvements $ 6,685 $ 6,379 $ 5,236

Expansions and major renovations 29,634 22,340 21,476

Development/redevelopment — — 698

Tenant improvements (including first generation leases) — 17 1,337

Total accretive capital improvements (1)

36,319 28,736 28,747

Other capital improvements:

11,071 9,482 8,464

Total $ 47,390 $ 38,218 $ 37,211

______________________________

(1) We consider these capital improvements to be accretive to revenue and not necessarily to net income.

Included in the capital improvement and development costs listed above are capitalized employee compensation in the amount of $2.0 million, $2.3 million and $1.1 million for the three years ended December 31, 2024, respectively, and while none for the two years ended December 31, 2024, capitalized interest in the amount of $0.3 million for the year ended December 31, 2022.

Accretive Capital Improvements

Acquisition Related Improvements:

Acquisition related improvements are capital improvements to properties acquired during the preceding three years which were anticipated at the time we acquired the properties.

These types of improvements were made in 2024 to Elme Druid Hills, Elme Cumberland, Elme Marietta and Elme Sandy Springs.

Expansions and Major Renovations:

Expansion projects increase the rentable area of a property, while major renovation projects are improvements sufficient to increase the income otherwise achievable at a property.

Expansions and major renovations during 2024 included managed Wi-Fi deployments at Cascade at Landmark, Elme Cumberland, Elme Druid Hills, Elme Leesburg, Elme Manassas, The Maxwell and The Wellington;

smart home technology at Elme Druid Hills;

access control modernization at Elme Dulles, Elme Herndon, Elme Leesburg and Elme Manassas;

the completion of a multi-phase fire alarm system modernization at Riverside Apartments;

and over four hundred fifty unit renovations across twenty communities.

Development/Redevelopment:

Development costs represent expenditures for ground up development of new operating properties.

Redevelopment costs represent expenditures for improvements intended to reposition properties in their markets and generate more income than would be otherwise achievable.

Development/redevelopment costs in 2022 included predevelopment costs for a future residential development adjacent to Riverside Apartments, which is currently on hold.

Other Capital Improvements

Other capital improvements, also referred to as recurring capital improvements, are those not included in the above categories.

Over time these costs will be recurring in nature to maintain a property's income and value.

This category includes improvements made as needed upon vacancy of an apartment.

Such improvements totaled $6.1 million in 2024, averaging approximately $1,607 per unit for the 42% of units which turned over relative to our total portfolio of apartment homes.

Aside from improvements related to apartment turnover, these improvements include facade repairs, installation of new heating and air conditioning equipment, asphalt replacement, permanent landscaping, new lighting and new finishes.

In addition, we incurred repair and maintenance expense of $5.3 million during 2024 to maintain the quality of our buildings.

Net cash used in financing activities increased in 2024 primarily due to executing the $125.0 million 2023 Term Loan during 2023, partially offset by the prepayment of a $100.0 million portion of an existing $250.0 million unsecured term loan during 2023 and higher net borrowings on the Amended and Restated Revolving Credit Facility during 2024.

Off Balance Sheet Arrangements

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Additional factors which may cause the actual results, performance or achievements of Elme Communities to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements include, but are not limited to:

(a) the risks associated with the outcome, objectives and timing of the strategic alternatives review, including the incurrence of costs and expenses and diversion of management’s time in connection with such review;

(b) the risks associated with ownership of real estate in general and our real estate assets in particular;

(c) the economic health of the areas in which our properties are located, particularly with respect to the greater Washington, DC metro and Sunbelt regions;

(d) risks associated with our ability to execute on our strategies, including new strategies with respect to our operations and our portfolio, including the acquisition of apartment homes in the Sunbelt markets and our ability to realize any anticipated operational benefits from our internalization of community management functions;

(e) the risk of failure to enter into and/or complete acquisitions and dispositions;

(f) changes in the composition of our portfolio;

(g) reductions in or actual or threatened changes to the timing of federal government spending;

(h) the economic health of our residents;

(i) the impact from macroeconomic factors (including inflation, increases in interest rates, potential economic slowdowns or recessions and geopolitical conflicts);

(j) risks related to our ability to control our expenses if revenues decrease;

(k) compliance with applicable laws and corporate social responsibility goals, including those concerning the environment and access by persons with disabilities;

(l) risks related to legal proceedings;

(m) risks related to not having adequate insurance to cover potential losses;

(n) changes in the market value of securities;

(o) terrorist attacks or actions and/or cyber-attacks;

(p) whether we will succeed in the day-to-day property management and leasing activities that we have previously outsourced;

(q) the availability and terms of financing and capital and the general volatility of securities markets;

(r) the risks related to our organizational structure and limitations of share ownership;

(s) failure to qualify and maintain our qualification as a REIT and the risks of changes in laws affecting REITs;

(t) other factors discussed under the caption “Risk Factors.”

(a) changes in the amount and timing of the additional liquidating distributions, including as a result of unexpected levels of transaction costs, delayed or terminated closings, liquidation costs or unpaid or additional liabilities and obligations;

(b) the possibility of converting to a liquidating trust or other liquidating entity;

(d) the response of our residents, tenants and business partners to the Plan of Sale and Liquidation;

(e) potential difficulties in employee retention as a result of the on-going Plan of Sale and Liquidation;

(f) the outcome of legal proceedings, including any that may be instituted against Elme, its trustees and others related to Elme’s recently completed 19-property multifamily portfolio, future property sales and the Plan of Sale and Liquidation;

(g) the risk that disruptions caused by or relating to the Plan of Sale and Liquidation will harm Elme’s business, including current plans and operations;

(h) risks relating to the market value of Elme’s common shares;

(i) risks associated with third party contracts containing consent and/or other provisions that may be triggered by the Plan of Sale and Liquidation;

(j) general risks affecting the real estate industry and local real estate markets (including, without limitation, the market value of Elme’s properties and potential illiquidity of Elme’s remaining real estate investments);

(k) whether or not the sale of one or more of Elme’s properties may be considered a prohibited transaction under the Internal Revenue Code of 1986, as amended;

(l) Elme’s ability to maintain its status as a real estate investment trust for U.S.

federal income tax purposes;

(m) the occurrence of any event, change or other circumstances that could give rise to the termination of the Plan of Sale and Liquidation;

(n) the risks associated with ownership of real estate in general and our real estate assets in particular;

(o) general economic and market developments and conditions;

(p) volatility and uncertainty in the financial markets;

(q) other factors discussed under the caption “Risk Factors.”

While forward-looking statements reflect our good faith beliefs, they are not guarantees of future performance.

For a further discussion of these and other factors that could cause our future results to differ materially from any forward-looking statements, see the section entitled “Risk Factors.” We undertake no obligation to update our forward-looking statements or risk factors to reflect new information, future events, or otherwise.

Funds From Operations

NAREIT FFO is a widely used measure of operating performance for real estate companies.

In its 2018 NAREIT FFO White Paper Restatement, the National Association of Real Estate Investment Trusts, Inc.

(“NAREIT”) defines NAREIT FFO as net income (computed in accordance with GAAP) excluding gains (or losses) associated with sales of properties;

impairments of depreciable real estate, and real estate depreciation and amortization.

We consider NAREIT FFO to be a standard supplemental measure for REITs, and believe it is a useful metric because it facilitates an understanding of the operating performance of our properties without giving effect to real estate depreciation and amortization, which historically assumes that the value of real estate assets diminishes predictably over time.

Since real estate values have instead historically risen or fallen with market conditions, we believe that NAREIT FFO more accurately provides investors an indication of our ability to incur and service debt, make capital expenditures and fund other needs.

Our NAREIT FFO may not be comparable to FFO reported by other REITs.

These other REITs may not define the term in accordance with the current NAREIT definition or may interpret the current NAREIT definition differently.

The following table provides the calculation of our NAREIT FFO and a reconciliation of NAREIT FFO to net loss for the three years ended December 31, 2024 (in thousands):

Year Ended December 31,

2024 2023 2022

$ (13,103) $ (52,977) $ (30,868)

Depreciation and amortization 95,935 88,950 91,722

Real estate impairment — 41,860 —

NAREIT FFO $ 82,832 $ 77,833 $ 60,854

Non-GAAP Measures

Due to the adoption of the Plan of Sale and Liquidation, we are no longer reporting NAREIT Funds From Operations, Net Operating Income or other non-GAAP measures, as we no longer consider these to be key performance measures.

Critical Accounting Estimates

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We believe the following accounting estimates are the most critical to aid in fully understanding our reported financial results, and they require our most difficult, subjective or complex judgments, resulting from the need to make estimates about the effect of matters that are inherently uncertain.

Accounting for Asset Acquisitions

We allocate the purchase price, including transaction costs, of acquired assets, including physical assets and in-place leases, and assumed liabilities, based on their fair values.

We determine the estimated fair values of the assets and liabilities in accordance with current GAAP fair value provisions.

We determine the fair values of acquired buildings on an “as-if-vacant” basis considering a variety of factors, including the replacement cost of the property, estimated rental and absorption rates, estimated future cash flows and valuation assumptions consistent with current market conditions.

We determine the fair value of land acquired based on comparisons to similar properties that have been recently marketed for sale or sold.

The fair value of in-place leases is based upon our evaluation of the specific characteristics of the leases.

Factors considered in the fair value analysis include the estimated cost to replace the leases, including foregone rents and expense reimbursements during hypothetical expected lease-up periods (referred to as “absorption cost”), consideration of current market conditions and

costs to execute similar leases.

We classify absorption costs as other assets and amortize absorption costs as amortization expense on a straight-line basis over the remaining life of the underlying leases.

Liquidation Basis

Income Producing Property

As of November 1, 2025, our investments in real estate were adjusted to their estimated net realizable value, or liquidation value, to reflect the change to the liquidation basis of accounting.

The liquidation value represents the estimated amount of cash that we expect to receive through the disposal of our assets as we carry out the Plan of Sale and Liquidation.

We estimated the liquidation value of our real estate investments generally based on either contractual purchase prices or offers received on the properties or, if no contracts or offers had been received yet, on management’s estimate of a property’s liquidation value, taking into account information obtained during the marketing and sale process for the properties, including with respect to levels of interest and valuation levels received.

The liquidation values of our investments in real estate are presented on an undiscounted basis and investments in real estate are no longer depreciated.

Subsequent to November 1, 2025, all changes in the estimated liquidation value of the investments in real estate are reflected as a change to our net assets in liquidation.

Accrued Liquidation Costs

We accrue for certain estimated liquidation costs to the extent we have a reasonable basis for estimation.

These costs include transaction costs, debt service costs, debt repayment amounts, capital expenditures for repair and maintenance, costs to run the Company until completion of the wind-down, including retention and severance costs, other compensation-related expenses, known financial obligations, other general and administrative costs, estimate REIT compliance costs and, other dissolution

costs, including legal costs, final audit/tax costs, insurance, and transfer agent related costs.

Going Concern Basis

Real Estate Impairment

We recognize impairment losses on long-lived assets used in operations, development assets or land held for future development, if indicators of impairment are present and the net undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amount.

We recognize impairment losses on long-lived assets used in operations or land held for future development, if indicators of impairment are present and the net undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amount.

Estimates of undiscounted cash flows are based on forward-looking assumptions, including annual and residual cash flows and our estimated holding period for each property.

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What changed 10-K

Item 7. Management’s Discussion and Analysis